ISLAMABAD: Pakistan`s food manufacturing industry has raised alarm over the proposed five per cent Federal Excise Duty (FED) on ultra-processed foods, warning it could derail the country`s growing processed food exports and penalise taxcompliant businesses already operating under significant economic pressure.

According to a statement, industry leaders warned that Pakistan`s emerging export sectors may suffer at a time when traditional industries like textiles were struggling with competitiveness.

The Pakistan Association of Food Industries (PAFI), which represents major food and beverage manufacturers, said the tax disproportionately targets compliant, tax-paying businesses leaving informal and grey market channels untouched, distorting the market and undermining long-term competitiveness.

`The proposed 5pc FED on ultra-processed foods places an undue burden on Pakistan`s formal food industry that complies with safety standards, pays taxes and sustains large-scale employment,` said Zahid Iqbal, the chairman of PAFI.

`This is a sector that contributes over Rs200 billion in taxes annually, supports allied industries like packaging, logistics and retail, and plays a crucial role in earning foreign exchange through exports.

He said the impact of the already-implemented Rs15/kg excise duty on sugar had been damaging to sub-sectors like confectionery, inflating costs and reducing production capacity.

A second flat tax, he warned, would compound these effects across the value chain.